State pot bank a long shot...Why not a State bank?

State pot bank a long shot

Thursday February 22, 2018


The chairman of the  Massachusetts Cannabis Control Commission floated the idea of opening a state-run bank to serve marijuana businesses, but the idea faces a lot of hurdles.

Steve Hoffman, the chairman of the commission, told the Boston Globe that no local banks or credit unions are willing to provide financial services to marijuana businesses because they fear running afoul of federal laws that still consider pot an illegal drug. With pot sales scheduled to start July 1, Hoffman said the businesses may have to rely entirely on cash -- a situation that is both inconvenient and dangerous.

Hoffman's idea to sidestep federal banking oversight by opening a state-owned bank is not new. Elected officials in California are examining the idea from a legal and financial perspective with the goal of completing a report by the end of the year. And officials in Colorado and other states have also considered the idea. The administration of Gov. Charlie Baker, according to the Globe, was "cool" to the idea of a state bank catering to marijuana businesses.

A Massachusetts commission explored the possibility of opening a state-owned bank for economic development purposes in 2011 and concluded it was a bad idea. The primary concern was cost. The commission said the initial capital investment to open a state bank would be $3.6 billion.

A state-owned bank theoretically would operate like a private one, accepting deposits and issuing loans. Profits could be used to further public causes. The Bank of North Dakota, the only publicly owned bank in the country, funneled $85 million into various state government funds over the last four years.


A state bank would also side step a lot of federal regulation, a major concern for marijuana businesses. Deposits would be insured by the state rather than the Federal Deposit Insurance Corp. The bank would also be regulated by the state and not by federal bank examiners. But one major drawback of a state institution serving the cannabis industry is that it probably couldn't gain access to the Federal Reserve system, which is needed for a bank to process checks, wire transfers, and electronic payments.

A state-regulated credit union in Colorado that wanted to serve the marijuana business was denied a Federal Reserve account in 2014. The credit union sued, but lost. It appealed the court ruling and earlier this month won the right to a Federal Reserve account but only if it agreed not to work with cannabis businesses.

BRUCE MOHL